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The New Brunswick government will increase taxes and reduce the civil service as part of its $8.9-billion budget for 2016-17, but has decided against new highway tolls and cuts to essential social programs.

The new budget delivered Tuesday will hike HST and corporate taxes by two percentage points as the government looks to eliminate a deficit forecast to hit $347 million this year.

Education and health care were spared major cuts, with the province announcing plans to hire 150 new teachers while 200 are expected to retire.

Finance Minister Roger Melanson said the government wanted to balance cuts with new revenue measures.

“There is general consensus that an increase to the HST is the best alternative to introducing deep cuts to essential public services such as health care and education,” he said.

The government estimates the HST increase, which puts the rate at 15 per cent, will boost revenues by about $300 million annually.

At 14 per cent, New Brunswick’s new corporate taxes will be in line with Newfoundland and Labrador while remaining lower than Nova Scotia and Prince Edward Island.

The tobacco tax will also rise by 3.26 cents per cigarette effective immediately, with another 3.26-cent hike coming on Feb. 1, 2017. The 6.52-cent increase will bring it to the same level as Nova Scotia.

“Tobacco taxes are imposed to discourage smoking and help pay for the additional costs smoking imposes on our health system,” Melanson said. “New Brunswick has the lowest tobacco tax in Atlantic Canada and the third-lowest in the country.”

The government also expects to realize $46.4 million in savings by cutting 1,300 positions from the civil service. The number of senior managers will be reduced by 30 per cent by March 31 while the number of middle managers will also be cut by 30 per cent over the next five years, mainly through attrition.

The transportation department will also see a reorganization of management while keeping a focus on core services including summer and winter maintenance and contract management. Non-core services will be shifted to the private sector with an estimated 200 casual workers affected during the construction season.

In total, the province estimates it will save $296 million and add $293 million, which will lead to a balanced budget by 2020-21.

A program review had previously identified six areas of focus for Premier Brian Gallant’s government, including cutting funds for health care and education, introducing highway tolls and implementing tax increases.

“While there was clear interest from New Brunswickers in introducing highway tolls, we believe consumers can only afford [either] an HST increase or highway tolls,” Melanson said.

Many critical of budget measures

Eddy Campbell, president of the University of New Brunswick, said he was relieved that universities were protected from major cuts.

“Government was faced with many tough choices as it deals with the fiscal reality facing the province,” he said. “There is no doubt that the impact of this budget on our university could have been much worse.”

Campbell added that a freeze on the university’s operating grant and a cap on tuition rates would still “impose a significant financial challenge.”

Opposition Leader Bruce Fitch said the budget makes every New Brunswicker’s wallet a little lighter.

“It’s really telling when you see the government come out and raise taxes…go through the massive cuts to civil servants and services, and we still end up with a huge deficit,” he said.

Green Party Leader David Coon was also critical, suggesting different taxes would better address the province’s problems.

“Tax things like income inequality. Tax things like pollution, carbon, sugar, rather than taxing all the necessities people need,” he said.

NDP Leader Dominic Cardy said the Liberal Party was “up to their same old tricks” in managing the province’s economy.

“Brian Gallant is reaching even deeper into the pockets of New Brunswick families again so he can fund huge handouts to his big business friends,” he said.

He said the NDP would save more money by curbing “corporate welfare”, suggesting that raising the HST is a “lazy way” to fix economic shortfalls.

Meanwhile, Imperial Tobacco Canada expressed disapproval for the government’s new budget measures, saying the increase in tobacco tax was done “in the misguided hopes of lining [the government’s] empty coffers on the backs of smokers.”

“I have to imagine that the smokers of New Brunswick will be furious today,” said Eric Gagnon, director of corporate affairs for Imperial Tobacco Canada. “This budget digs deep into their pockets for no return. Smokers will simply turn to the illegal market.”